790 million tonnes and rising: Big & small MDOs help meet coal demand

In 2015, the coal mining sector started from scratch following a Supreme Court order cancelling all prior mine allocations and the implementation of the Coal Mines (Special Provisions) Act (CMSPA).

This led to record coal mine awards to both public and private sectors and the industry, which until last decade was seen as dominated by contractors, metamorphosed into a thriving mine developer and operator (MDO) ecosystem.

According to data collated by Business Standard, 82 mines with a cumulative annual production of around 790 million tonnes (mt) are being operated and mined by private MDOs. These are the mines that have been awarded to several public sector companies, such as NTPC, NLC, and SAIL, and power generation companies of several state governments. This is in addition to the coal production planned by national miner Coal India (CIL), which is looking to outsource close to 90 per cent of its mines to MDOs in five years.

There are nearly 15 MDO tenders under process for a cumulative capacity of 112 mt per annum (mtpa).

Conglomerates Adani Enterprises and Essel Mining, engineering companies such as Dilip Buildcon and BGR Mining, and even local contractors which are now EPC (engineering, procurement, and construction) firms are plugged into the coal MDO ecosystem. 

Black gold for energy goals

In a recent conversation with Business Standard, Pramod Agrawal, chairman and managing director, CIL, said close to 75 per cent of the company’s coal excavation is outsourced. Similarly, in action plan prepared for 2023-24, the Ministry of Coal said: “For enhancing coal production and for bringing in the efficiencies, the Ministry of Coal has taken the measure of the ‘mining development and operator’ (MDO) model for operationalisation of CIL mines.”

Rising electricity demand is pushing for more coal mining as thermal power continues to be the backbone of supply.

The ministry and CIL are looking at MDOs for bringing cost and technology efficiencies into coal mining. According to senior officials, through MDOs, the ministry is looking to meet its asset monetisation target, as well. For the current financial year, the coal ministry has set the asset monetisation target at Rs 50,118 crore, of which close to 10-20 per cent via MDOs, said officials. Last financial year, of total achieved monetisation of Rs 24,626 crore, MDOs accounted for Rs 6,735 crore.

Among private miners, the Adani group currently owns the biggest share of the MDO pie. It has nine blocks with a cumulative capacity of 100 mtpa. Essel Mining has four mines. Thriveni Engineering, Sainik Mining, Ambey Mining, and Talabira Mining are a few examples that started as local mining firms but now have multiple contracts.

Tamil Nadu-based Thriveni claims to have the largest fleet of heavy earth-mover machinery. Bengaluru-based JMS Mining on its website says has 13 underground mining projects with a total production target of 5.7 mtpa.

Not all is black or white

MDOs have courted controversies, as well, The Adani group has faced stiff and continuous protests in Chhattisgarh. According to many civil society and environment groups, MDOs do not follow the same sustainability and resettlement & rehabilitation (R&R) practices that mine owners, such as CIL, are obliged to adhere under the law.

One of the most prominent protests has been regarding the Parsa East Kete Basan coal block in the vicinity of the Hasdeo forest area in Chhattisgarh. The mine was allotted to Rajasthan Rajya Vidyut Utpadan Nigam (RRVUNL) in 2015, which subsequently gave an MDO contract to Adani Mining. Last year, the state government restricted mining to only certain areas. Company executives have, however, claimed the supply of coal would continue to Rajasthan. RRUVNL could not be reached for comment.

Senior CIL executives said the company has set stringent regulations for its MDOs and they must follow the same labour and R&R practices that the company follows.

Additionally, there have been frequent changes to the law to make MDO operations easier. Before 2015, MDOs were allowed ownership of the coal mine contracted to them but the rule was amended with the CMSP Act, 2015. It was altered further to allow past MDO contractors to continue with the mines awarded under the UPA regime, but ownership was disallowed.

In response to a Parliamentary question in March this year, Pralhad Joshi, Union coal minister, said: “To ensure the appointment of MDOs after allocation of coal blocks to governments companies in future, the NITI Aayog had recommended that instead of amending the CMSP Act, the Ministry of Coal may insert a clause in the Coal Mine Development & Production Agreement signed between the government and the government companies’ allottees barring appointment of MDOs before the allotment of coal block.”